Bank of the Philippine Islands

July 22, 2009 BIR RULING [DA-(C-136) 391-09] DA-528-2004 Bank of the Philippine Islands 17th Floor, BPI Head Office Ayala Avenue corner Paseo de Roxas Makati City Attention: Ma. Leonora V. Mendoza Assistant Vice-President Gentlemen : This refers to your letter dated January 5, 2009 stating that Bank of the Philippine Islands as Trustee of BPI Group of Companies Retirement Fund (formerly Pilipinas Bank Retirement Plan), is a corporation organized and existing under the laws of the Republic of the Philippines; that it is the true and absolute owner of one (1) "C" share of Orchard Golf & Country Club with stock certificate No. C-00456; that on the other hand, Worldlink Freight Systems, Inc. is a corporation organized and existing under the laws of the Republic of the Philippines with office address at 25 Cargo Village Complex, NAIA, Paraaque City; and that on January 26, 2009, a Deed of Absolute Sale was executed by and between BPI, as trustee of the BPI Group of Companies Retirement Fund and Worldlink Freight Systems, Inc. whereby the former transferred to the latter the abovementioned shares for and in consideration of P280,000.00. In connection therewith, you now request for a confirmation of your opinion on: "1. Whether or not BPI, as trustee of BPI Group of Companies Retirement Fund is exempt from capital gains tax on the sale of golf share and consequently from the payment of the Creditable of stock in Withholding Tax; and "2. Whether or not BPI, as trustee of BPI Group of Companies Retirement Fund is exempt from the documentary stamp tax on the sale of such shares." In reply thereto, please be informed that Section 60 (B) of the Tax Code of 1997 provides "Sec. 60. Imposition of Tax. "xxx xxx xxx "(B) Exception. The tax imposed by this Title shall not apply to employee's trust which forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees: . . ." Considering that the BPI Group of Companies Retirement Fund is an employees' trust fund established under then Section 28 (b) (7) (A) of the Tax Code [32 (B) (6) (a) of the Tax Code of 1997] for the exclusive benefit of all the employees of BPI Group of Companies Retirement Fund and the corpus or income of the fund is not used for or diverted to purposes other than for the exclusive benefit of the members and their beneficiaries, this office holds that the sale of the Orchard Golf & Country Club share to World link Freight System, Inc. is exempt from capital gains tax under Section 24 (C) of the Tax Code of 1997 and consequently from withholding tax prescribed in Revenue Regulations No. 2-98, as amended. (BIR Ruling No. DA087-02 dated May 2, 2002) However, the sale of the aforesaid shares of stock in Orchard Golf & Country Club to World link Freight System, Inc. is subject to documentary stamp tax at the rate of P0.75 on each P200 or fractional part of the par value of the stocks as prescribed in Section 176 of the Tax Code of 1997, as amended by R.A. No. 9243. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service